Did you know India’s tax regime is one of the most complex in the Asia-Pacific region? Deloitte’s Annual Economic and Social Survey states that India’s tax regime is the second most complex, following China in Asia-Pacific.
You might have faced these complexities, understanding the new regime tax laws introduced in 2020. Moreover, its reformation in 2023’s union budget added new confusion. We’re here to help you navigate this new income tax regime.
Despite being the default, the new tax regime finds a lot of contempt. The government brought this optional tax rate system to lower tax rates and simplify taxation by limiting various exemptions.
In contrast to the old regime, taxpayers in the new income tax regime cannot claim many deductions and exemptions. Previously, taxpayers claimed deductions under LTA, HRA, 80C, and 80D. Naturally, the new regime lost its intent.
Hence, budget 2023 improvised the new regime tax policy to persuade more citizens to opt for it. It introduced certain adjustments.
While the previous taxable limit began at INR 5 lakhs, it is now increased to INR 7 lakhs. Hence, citizens earning up to INR 7 lakh need not income pay taxes.
As per the new regime, tax slab rates are lower and simpler. Find the comparison of the slab rates of the old and new income tax regimes.
Like the old, the new regime also includes a standard deduction of INR 50,000. Moreover, family pensioners are eligible for certain deductions.
Before learning to save your taxes, know the significant exemptions within the new tax regime:
Here are some tips to mindfully use the changes to optimise taxes:
Despite the unpopularity of the new regime tax norms, they can be utilised optimally in some cases. With lowered tax slabs, easier processes, and lesser documentation, the new tax regime may suit some, especially newcomers.
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Taxpayers can opt for the new or old tax regime while filing their income tax returns.
The choice depends on personal income and other factors. Individuals are eligible for more deductions benefits under the old regime. Recent earners, individuals with lower incomes or investments, benefit from the new regime.